20110317Comments.pdf

KRISTINE A. SASSER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BAR NO. 6618
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR A
DETERMINATION REGARDING A FIRM
ENERGY SALES AGREEMENT BETWEEN
IDAHO POWER AND ALPHA WIND, LLC
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR A
DETERMINATION REGARDING A FIRM
ENERGY SALES AGREEMENT BETWEEN
IDAHO POWER AND BRAVO WIND, LLC
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR A
DETERMINATION REGARDING A FIRM
ENERGY SALES AGREEMENT BETWEEN
IDAHO POWER AND CHARLIE WIND, LLC
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR A
DETERMINATION REGARDING A FIRM
ENERGY SALES AGREEMENT BETWEEN
IDAHO POWER AND DELTA WIND, LLC
STAFF COMMENTS
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) CASE NO. IPC-E-IO-51
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) CASE NO. IPC-E-IO-52
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) CASE NO. IPC-E-IO-53
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) CASE NO. IPC-E-IO-54
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MARCH 17,2011
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR A
DETERMINATION REGARDING A FIRM
ENERGY SALES AGREEMENT BETWEEN
IDAHO POWER AND ECHO WIND, LLC
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) CASE NO. IPC-E-IO-55
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) COMMENTS OF THE
) COMMISSION STAFF
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COMES NOW the Staff of the Idaho Public Utilties Commission, by and through its
Attorney of record, Kristine A. Sasser, Deputy Attorney General, and in response to the Notice of
Applications and Notice of Modified Procedure issued in Order No. 32188 on February 24,2011, in
Case Nos. IPC-E-l 0-51, -52, -53, -54, and -55, submits the following comments.
BACKGROUND
On December 16, 2010, Idaho Power Company fied Applications requesting acceptance or
rejection of five 20-year Firm Energy Sales Agreements (Agreements) between Idaho Power and
Alpha Wind, LLC; Bravo Wind, LLC; Charlie Wind, LLC; Delta Wind, LLC; and Echo Wind, LLC.
The five projects (Facilities) are all located near Burley, Idaho. The projects wil all be "Qualifying
Facilities" (QFs) under the applicable provisions of the Public Utility Regulatory Policies Act of 1978
(PURPA).
The Agreements
On December 15,2010, Idaho Power and each of the five wind projects entered into their
respective Agreements. Under the terms of the Agreements, the wind projects each agree to sell
electric energy to Idaho Power for a 20-year term using the current non-Ievelized published avoided
cost rates as currently established by the Commission in Order No. 31025 for energy deliveries of less
than 10 aMW. Applications at 4. The Applications recite that Alpha, Bravo, Delta, and Echo facilities
wil have a maximum capacity amount of29.9 MW. Charlie wil have a maximum capacity of27.6
MW. ¡d. Under normal and/or average conditions, each Facility wil not exceed 10 aMW on a
monthly basis. Idaho Power warants that the Agreements comport with the terms and conditions of
the various Commission Orders applicable to PURP A agreements for a wind resource. Order Nos.
30415,30488,30738 and 31025.
STAFF COMMENTS 2 MARCH 17,2011
Each Facility has selected October 31,2014, as its Scheduled First Energy Date and December
31, 2014, as its Scheduled Operation Date. Applications at 5. Idaho Power asserts that various
requirements have been placed upon the Facilities in order for Idaho Power to accept the Facilities'
energy deliveries. Idaho Power states that it wil monitor the Facilities' compliance with initial and
ongoing requirements through the term of the Agreements. The paries have each agreed to liquidated
damage and security provisions of$45 per kW of nameplate capacity. Agreement, ~~ 5.3.2,5.8.1.
Idaho Power asserts that it has advised each Facility of the Facilty's responsibilty to work
with Idaho Power's Delivery business unit to ensure that sufficient time and resources wil be available
for Delivery to construct the interconnection facilities, and transmission upgrades if required, in time to
allow each Facilty to achieve its December 31, 2014, Scheduled Operation Date. The Applications
state that each Facility has been advised that delays in the interconnection or transmission process do
not constitute excusable delays and if a Facility fails to achieve its Scheduled Operation Date delay
damages wil be assessed. Applications at 7. The Applications further maintain that each Facility has
acknowledged and accepted the risk inherent in proceeding with its Agreement without knowledge of
the requirements of interconnection and possible transmission upgrades. ¡d. at 7.
Idaho Power states that each Facility has also been made aware of and accepted the provisions
in each Agreement and Idaho Power's approved Schedule 72 regarding non-compensated curtailment
or disconnection of its Facility should certain operating conditions develop on Idaho Power's system.
The Applications note that the parties' intent and understanding is that "non-compensated curtailment
would be exercised when the generation being provided by the Facility in certin operating conditions
exceeds or approaches the minimum load levels of (Idaho Power's) system such that it may have a
detrimental effect upon (Idaho Power's) abilty to manage its thermal, hydro, and other resources in
order to meet its obligation to reliably serve loads on its system." ¡d. at 7-8.
By their own terms, the Agreements wil not become effective until the Commission has
approved all of the terms and conditions and declares that all payments made by Idaho Power to the
Facilities for purchases of energy wil be allowed as prudently incurred expenses for ratemaking
purposes. Agreement ~ 21.1.
Idaho Power's Applications specifically note the Joint Petition it fied with the Commission on
November 5, 2010, requesting an immediate reduction in the published avoided cost rate eligibility cap
from 10 aMW to 100 kW. Applications at 2. Idaho Power states that it is aware of and in compliance
with its ongoing obligation under federal law, FERC regulations, and Idaho Public Utilties
Commission Orders to enter into power purchase agreements with PURPA QFs. ¡d. at 3. However,
STAFF COMMENTS 3 MARCH 17,2011
Idaho Power asserts in each of its Applications that "the request in this Application...is made with the
specific reservation of rights and incorporation of the averments set forth in the Joint Petition regarding
the possible negative effects to the (sic) both the utilty and its customers of additional and unfettered
PURP A QF generation on system reliabilty, utilty operations, and costs of incorporating and
integrating such a large penetration level of PURP A QF generation into the utilty's system." ¡d.
Idaho Power further states that "the continuing and unchecked requirement for the Company to acquire
additional intermittent and other QF generation regardless of its need for additional energy or capacity
on its system not only circumvents the Integrated Resource Planing process and creates system
reliabilty and operational issues, but it also increases the price its customers must pay for their energy
needs." ¡d. at 4.
STAFF ANALYSIS
All five of the Agreements submitted for approval are nearly identical except for the names of
the facilties and the LLCs under which each is being developed. All five of the projects are also
proposed to be built in the same general vicinity as shown on the map included as Attchment A.
The five facilities collectively are expected to generate 377,737 MWhs annually. Under the
non-Ievelized rates in the Agreements, the annual energy payments by Idaho Power for the expected
generation wil be approximately $26.0 milion in 2015 increasing to approximately $46.8 milion in
2033, or a cumulative total of$716.4 milion over the 20-year term of the Agreements. The collective
net present value of the energy payments over the life of the Agreements wil be approximately $236.5
milion.
With the exception of rates, all of the other terms and conditions included in the Agreements
are consistent with recent Commission orders. There are no disputes between the parties over any
terms and conditions.
Temporary Lowering ofthe Eligibilty Cap for Published Rates
On November 5, 2010, Idaho Power Company, Avista Corporation, and PacifiCorp dba Rocky
Mountain Power (Utilties) filed a Joint Petition requesting that the Commission initiate an
investigation to address various avoided cost issues related to PURP A. While the investigation is
underway, the Petitioners also requested that the Commission "lower the published avoided cost rate
eligibility cap from 10 aMW to 100 kW (to) be effective immediately. . .." Petition at 7. On
December 3, 2010, the Commission issued Order No. 32131, Notice of Joint Petition, Notice of
STAFF COMMENTS 4 MARCH 17,2011
Intervention Deadline, Notice of Oral Argument. In the Order, the Commission declined to
immediately reduce the published avoided cost rate eligibility cap, but did establish a schedule for
processing the Utilties' request to reduce the eligibilty cap via Modified Procedure and to schedule an
oral argument. In paricular, the Commission stated its desire to receive comments regarding the
following:
(1) the advisability of reducing the published avoided cost eligibility cap;
(2) if the eligibility cap is reduced, the appropriateness of exempting non-wind QF projects
from the reduced eligibilty cap; and
(3) the consequences of dividing larger wind projects into 10 aMW projects to utilze the
published rate.
In its Order, the Commission went on to state "Finally, it is our intent that our decision regarding
the 'Joint Motion' to reduce the published avoided cost eligibilty cap shall become effective on
December 14,2010." Reference Order No. 32131 at 5-6, emphasis added. By stating its intent,
parties were given clear, unambiguous, advance notice that the eligibilty cap may be reduced.
Written comments were submitted by the paries on December 22, 2010, written reply
comments were submitted on January 19,2011, and Oral Argument was heard on January 27,2011.
On February 7, 2011, the Commission issued Order No. 32176 which temporarily reduced the
eligibilty cap for published avoided cost rates from 10 aMW to 100 kW for wind and solar QFs only.
In accordance with its stated intent in Order No. 32131, Order No. 32176 confirmed that the reduction
in the eligibility cap would be effective December 14, 20 I O. Reference Order No. 32176 at 11-12.
Each of the five Agreements presented for Commission approval was signed by the project
developer on December 13,2010, and signed by Idaho Power on December 15,2010. The
Agreements were fied with the Commission on December 16,2010. The Agreements contain rates
from Order No. 31025, the published rates currently in effect. However, as a result of Order No.
32176, wind and solar QF contracts executed on or after December 14,2010 for facilties larger than
100 kW are ineligible for those rates.
As a matter of law, Staff considers the effective date of a contract to be that date upon which
both parties have signed the agreement. A signature by only one party, Staff believes, does not create
an enforceable contract nor establish an effective date. Consequently, for the submitted Agreements,
Staff considers the effective date to be December 15,2010.
Because the effective date of each of the Agreements is not prior to December 14, 2010, the
date on which the lowered eligibility cap became effective, and because the size of each proposed wind
STAFF COMMENTS 5 MARCH 17,2011
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project clearly exceeds 100 kW, the current eligibility cap for wind and solar facilties to obtain a
published rate contract, Staff considers the rates contained in the Agreements to be in violation of
Commission Order No. 32176. Consequently, Staff recommends denial of each of the five
Agreements.
In order for the rates in the Agreements to comply with Commission Orders, Staff believes that
they would have to be determined using the IRP methodology. Staff suggests that the Commission
deny approval of the Agreements without prejudice and permit revised agreements to be submitted
containing rates computed under the prescribed IRP methodology. Alternatively, the Agreements
could be voluntarily withdrawn, then held pending the outcome of the initial phase of Case No.
GNR-E-II-0l in which the Commission wil determine the disposition of its prior decision to
temporarily lower the eligibility cap from 10 aMW to 100 kW.
ST AFF RECOMMENDATION
Staff recommends that the Commission not approve any of the five Agreements.
Respectfully submitted this i 1!l day of March 2011.
~Ja.~'4
Kris ne A. Sasser
Deputy Attorney General
Technical Staff: Rick Sterling
i:umisc:commentsipce i 0.5 i _52_53 _54_55ksrps comments
STAFF COMMENTS 6 MARCH 17,2011
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 17TH DAY OF MARCH 2011,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NOS. IPC-E-I0-51_52_53_54_55, BY MAILING A COPY THEREOF, POSTAGE
PREPAID, TO THE FOLLOWING:
DONOV AN E WALKER
LISA D NORDSTROM
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: dwalker(ßidahopower.com
Inordstrom(ßidahopower .com
RANDY C ALLPHIN
ENERGY CONTRACT ADMIN
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: rallphin(ßidahopower.com
COTTEREL WIND ENERGY CENTER LLC
150 N DAIRY ASHFORD
BUILDING C SUITE 656D
HOUSTON TX 77079
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SECRETAR
CERTIFICATE OF SERVICE